Ok, so there were people who said WTF when Facebook bought Instagram for a BILLION dollars in 2012, saying how on earth can it be worth that? They had a point. Instagram had 13 employees. Yup, that was not a typo, THIRTEEN. By contrast, for example, Comptacenter PLC has the same market cap and employs 12,993 people. Yup, a single instagram member of staff was worth 1,000 people at computacenter. That was insane.

But today I hear that linkedin has been bought for 26 billion dollars. Lets put 26 billion in perspective.

Thats more than the market cap of Associated British Foods, a company that employs 124,000 people, has 6 million square feet of retail space, owns twinings, ovaltine and primark, was established in 1935 and now has 200 stores.

Thats more than the GDP of Estonia, Uganda, El Salvador or Latvia.

Linkedin has 9,000 staff, and presumably some buildings, and a great big email list, which, lets be honest contains a LOT of peoples details like me, who tried and tried and tried again to stop the damned company spamming me before eventually setting up an email filter to nuke any mention of the damned company, as the only way to stop the endless spam.

So a spammers database, and a website, and presumably some office chairs, some name recognition 9although not all positive, by any means). And thats worth 26 Billion dollars.

The thing is, other companies worth 26 billion have something tangible. Associated British Foods has a lot of physical assets. Even if the company became associated with pure evil, you can still break it up, sell the buildings and recover some of the capital, but when it comes down to it, linkedin is a social network. A SOCIAL network. And these never go out of fashion do they?

myspace

Newscorp paid 12 Billion for myspace in 2007. Then they ended up selling it for 35 million four years later. Yup…these things happen eh?

This acquisition seems to me to be the kind of thing massive tech CEOs do in order to feel big and important. Its not a sensible purchase, its a bullshit valuation (oh BTW have I mentioned that linkedin makes NO money. All ikts done so far is burn through investors cash. Literally you would be better off owning Positech than Linkedin), and I’m not at all surprised Microsofts stock dropped a bit on the news. This is a case of big tech having surplus cash and not having a clue what to do with it.

I have a suggestion for all the tech CEO’s who don’t know what to do with the spare cash.

Pay some tax.

Or actually build something tangible with it. Facebook and Apple are at least investing in some physical infrastructure in the form of their own renewable energy to power their datacenters. Tesla is investing in a big battery factory (very big!). 26 billion dollars can achieve a hell of a lot. You could build the severn barrage in the UK, a renewable power source that would last roughly 120 years. You could develop a 76 acre urban complex in Las Vegas:   https://en.wikipedia.org/wiki/CityCenter  TWICE.

But no, why not buy linkedin, they have a big email list. Thats way easier, their offices are just down the street.

Is this the ‘big thinking’ that CEOs get their big salaries for?

 

11 Responses to “Linkedin is not worth 26 billion”

  1. CdrJameson says:

    All that surplus cash has to go somewhere.

    This way they buy something ephemeral, it evaporates along with the value and some steam gets taken out of the economy. By throwing 26 billion dollars down the drain everybody else’s money gets to be worth a bit more. That’s very generous when you think about it.

  2. John says:

    I don’t think you’re seeing what Microsoft could be planning here. This looks to me to be a very strategic move. They’re not just buying assets here, or a team, or even a mailing list.

    Salesforce (a huge cloud CRM company) was looking at either buying or merging with LI. MS also has a CRM product called Dynamics. Gaining access to over 364 LinkedIn users has the potential to give them a real advantage over Salesforce.

    This lines up with their push lately to move their product lines to the cloud. With potentially 364 million leads** in their online CRM database, they can jump ahead of Salesforce and perhaps become market leader.

    That’s not including the benefits of integrating with Office, and their other cloud services. Done right, this could really work for them.

    ** 26 billion dollars divided by 364 million users comes to approximately $71 per user/lead. When you consider the lifetime revenue that each lead can potentially bring in, then this actually seems like a bit of a bargain.

    • cliffski says:

      But how many of those valuable linkedin accounts are like mine, which I’ve tried time and again to get LI to remove and just says ‘dont ever contact me, I regret ever signing up’. Linkedin is FAMOUS for its spam, and being difficult to delete your account. I’d be amazed if a quarter of its accounts are relevant and real.

      • Ryan says:

        Seems like Linkedin has made a really bad impression in the UK. In the Philippines it’s tolerated. I treat it as any other social network. Funnily enough, I have a friend in NZ that says in the the NZ startup world Linkedin is their Facebook, ie their social network of choice.

  3. JPM says:

    According to my local newpaper, MS is seeking a new loan to fund the acquisition. How does that change the picture?

    • CdrJameson says:

      In some cases it’s cheaper to get a loan in the US than to bring offshore profits back to the US and pay the tax that would be due. Don’t know if this applies in this case, but it sounds like it’s just accounting.

      • CdrJameson says:

        …which also means if you’re looking for easy money set up a business that Apple might like the look of but base it in Ireland. They’ve got loads of money stuck there that they can’t do anything with.

  4. Joe says:

    And to think they paid that much, because they had had to outbid someone else. We’re definitely in the wrong business.

  5. Christopher Seaton says:

    Hahaha! Pay taxes… that is just.. wow. Thanks for the laugh, Cliff!

    • Christopher Seaton says:

      By the by, do you watch Silicon Valley? If not, you really should give it a go. This post makes me think of several scenes from it :)

  6. Andy Brice says:

    But that Nokia acquisition worked out so well!